What are the advantages and disadvantages of using an increase in the gasoline tax

| November 24, 2016

Q1. What are the advantages and disadvantages of using an increase in the gasoline tax to move transport decisions towards both efficiency and sustainability?

Q2. Using the concept of the inter-temporal model, explain what will happen in the following situations (ie. will consumption shift from period 1 to period 2 or from period 2 to period 1).

The discount rate in the second period drops (from, example, 10 to 5%)
There is a decrease in the population in the second period.
The MC will be lower in the 2ndperiod than it is in the 1stperiod.
More of the limited resource is discovered in period 2.
What is inter-temporal fairness?
Q3. Are the following statements true or false? Explain

a. If the government prices public transport so that it breaks even, then the net benefit of a cost benefit analysis must be zero.

b. The equi-marginal principle will ensure that the reduction in emissions will be the same for each firm that is subject to regulation.

Q4. The notion of sustainability is not the same in the natural sciences as in economics. In the natural sciences, sustainability frequently means maintaining a constant physical flow of each and every resource (eg. fish from the sea or wood from the forest), while in economics it means maintaining the value of those service flows. When might the two criteria lead to different choices? Why? How does the concept of fungibility influence the concept of sustainability?

Q5. Emission taxes and transferable permits are both incentive based pollution controls. Explain both and give an explanation and example for a case when taxes are preferred to TDP’s and when TDP’s would be preferred to Taxes.

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